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NAIFA will focus on preserving the tax status of life insurance proceeds when members of the insurance industry arrive in Washington this week, NAIFA's Diane Boyle says. The group also is prepared to counter the argument that the "inside-buildup" incentive mainly benefits wealthy investors, arguing that nearly 60% of the households served by NAIFA members earn less than $100,000 annually. "We want to maintain those safety nets for individuals that are truly needy," Boyle said.

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Life insurance is a means of managing risk that provides financial protection to the beneficiaries of the insured and, as a result, saves the U.S. government from incurring costs, write Adam Sherman and Timothy Hall of Firstrust Financial Resources. That's the reason behind the product's long-held tax status and why it will remain a responsible purchase despite any changes to that status, they write. Advisers should make sure Congress knows of life insurance's importance, and clients should know that tax changes to life insurance typically have affected new policies, although taxing some features of existing policies, such as the inside cash buildup, have been proposed, Sherman and Hall write.

Life insurance helps 75 million U.S. families provide for themselves and their loved ones and avoid depending on government support in the event of a loss, writes B. Hyatt Erstad of Erstad & Co. Taxing the proceeds of life insurance products, which account for 20% of U.S. long-term savings, would create more problems than it solves, writes Erstad, who will join other NAIFA members in taking that message to Congress this week.

The tax-advantaged status of life insurance products faces a serious challenge as the demand for a tax overhaul rises, industry experts say. NAIFA aims to show Congress how life insurance can generate savings and protection for middle-market Americans. People who lack that protection could "end up running through limited savings that they have and relying on government programs," NAIFA's Diane Boyle says. "We know now that the government programs are strained, so we want people that are able to take responsibility for themselves to take that planning step.”

Americans should prepare for measures that could impose limits on tax-advantaged retirement contributions and affect Medicare and Social Security, NAIFA's Diane Boyle says. People also may want to consider converting their 401(k) plans to Roth 401(k)s, opening a Roth IRA or increasing their retirement-account contributions in response to the recent American Taxpayer Relief Act, other experts say.

NAIFA members must iron out any differences and focus on maintaining their influence as Congress reconsiders the tax-favored treatment of life insurance, NAIFA President Robert Miller said at association's annual meeting in Las Vegas. He said that NAIFA's benefits to state and local chapters also remain strong, but acknowledged there is room for improvement throughout the organization. "No matter which political party members in this room belong to, there is one bandwagon you better get on today: the insurance party. We are one signature away from extinction -- just one," Miller said.